The Reserve Bank of India (RBI), in an affidavit filed with the Delhi High Court, said that generalisation for the release of funds to meet the financial needs of the Punjab & Maharashtra Co-operative (PMC) Bank depositors may not be sustainable due to the bank’s financial instability. The affidavit was filed by the RBI in response to a petition filed by consumer rights activist Bejon Kumar Misra.
Misra sought the release of emergency funds to aid depositors that are struggling due to the second wave of the coronavirus while also seeking an extension of the directions issued to PMC Bank under the 1949 Banking Regulation Act as ultra vires.
The RBI responded by saying that the petitioner’s request for relief held no merit as depositors are currently allowed to withdraw up to ₹5 lakh on the grounds of hardship pertaining to treatment of terminal illnesses, which includes the treatment of COVID-19.
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The RBI went on to say that it has granted the authority to approve payments under hardship grounds to PMC so as to make the process of withdrawal easier and more efficient. “...it is the duty of PMC Bank to pay hardship amount to the eligible depositors as per directions of RBI and subject to availability of liquidity with PMC Bank,” an excerpt of the RBI’s affidavit read.
As for a potential takeover of PMC, RBI said, “It is submitted that all efforts are underway to expedite consultations with the prospective investors who have submitted their final offer, in order to arrive at best possible resolution in the interest of all depositors and other stakeholders of the bank.”
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The central bank acknowledged that PMC’s financial condition continues to be “precarious”, adding that its liquidity position hasn’t improved very much to allow an increased withdrawal limit.
In addition, PMC will also have to maintain bare minimum liquidity to keep its operations running so that it can be a viable prospect for interested investors for a merger or takeover. The coalition of Centrum Group and BharatPe is currently emerging as one of the biggest names for a potential takeover of PMC.
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